Exhibit 99.1
For Immediate Release
Media Relations Contacts:
Ms. Mary De La Garza,
mary.delagarza@idearc.com,
972-453-7016
or
Ms. Jannie Luong,
jannie.luong@idearc.com,
972-453-3916
Investor Relations Contact:
Mr. Samuel D. (Dee) Jones,
dee.jones@idearc.com,
972-453-7364
IDEARC ANNOUNCES 2007 RESULTS
DALLAS– February 7, 2008 – Idearc Inc. (NYSE: IAR) today announced financial results for the fourth quarter and year ended December 31, 2007.
2007 Company Highlights:
| | • | | Achieved Internet revenue growth of approximately 24 percent. |
| |
| | • | | Maintained strong OIBITDA margins. |
| |
| | • | | Increased net income and earnings per share on an adjusted pro forma basis. |
Kathy Harless, the Company’s president and CEO, said, “Our 2007 performance was in line with our expectations. As we begin the new year, we remain steadfast in the long-term view of the business and in our ability to maximize stockholder value through our multi-product strategy.
I look forward to today’s conference call and updating you on our progress and on our view for 2008.”
Dividend Announcement
On February 6, 2008, the Idearc board of directors declared a quarterly dividend of 34.25 cents per outstanding share. The dividend will be paid on or about March 13, 2008, to stockholders of record at the close of business on February 21, 2008. Strong and stable cash flows underlie the Company’s ability to maintain its dividend to stockholders.
Financial Summary
On an adjusted pro forma basis, Idearc had multi-product revenues of $3,189 million for 2007, a decrease of 0.8 percent compared to 2006. On a GAAP basis, the Company reported multi-product revenues of the same $3,189 million for 2007, a decrease of one percent compared to 2006. The Company reported Internet revenue of $285 million for 2007, an approximate 24 percent increase compared to 2006.
Idearc reported multi-product revenues of $787 million for the fourth quarter 2007, a decrease of 1.7 percent compared to the same period in 2006. The Company reported Internet revenue of $75 million in the fourth quarter 2007, a 19 percent increase over the same period in 2006.
Idearc reported operating income, net income and earnings per share on an adjusted pro forma basis as well as on a GAAP basis. The adjusted pro forma basis measures are described below and are reconciled to the corresponding GAAP measures in the accompanying financial schedules.
The Company adopted a change in accounting methodology associated with sales commissions in the second quarter of 2007. Prior to that time, sales commissions were recognized as incurred. Idearc is presently deferring sales commissions and recognizing these costs over the life of the product. This methodology is consistent with those of other directory publishers and is aligned with the Company’s revenue recognition policy. Prior period financial information has been restated to reflect this change.
On an adjusted pro forma basis, 2007 OIBITDA was $1,518 million, a decrease of 2.8 percent compared to the prior year. Adjusted pro forma OIBITDA margins were 47.6 percent for 2007 as compared to 48.6 percent for 2006.
Excluding the effect of the accounting change, 2007 OIBITDA, on an adjusted pro forma basis, would have been the same $1,518 million, or a 1.2 percent decrease over 2006. Excluding the effect of the accounting change, 2007 adjusted pro forma OIBITDA margins reflected slight margin contraction at 47.6 percent compared to 47.8 percent in 2006.
After reflecting the impact of transition costs as described in the accompanying financial schedules, the Company reported 2007 OIBITDA of $1,431 million, a decrease of 0.3 percent compared to 2006.
Fourth-quarter 2007 OIBITDA, on an adjusted pro forma basis, was $350 million, a 6.9 percent decrease compared to the same period in 2006. Adjusted pro forma OIBITDA margins were 44.5 percent in the fourth quarter 2007, compared to 46.9 percent in the same period in 2006.
After reflecting the impact of transition costs as described in the accompanying financial schedules, the Company reported OIBITDA of $333 million for the fourth quarter 2007, a 11.7 percent increase compared to the same period in 2006.
On an adjusted pro forma basis, 2007 net income was $484 million, or $3.32 per diluted share, an increase of $4 million or 3 cents per diluted share over 2006. The Company reported net income of $429 million, or $2.94 per diluted share for 2007.
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Fourth-quarter 2007 net income, on an adjusted pro forma basis, was $110 million, or 75 cents per diluted share, an increase of $5 million or 3 cents per diluted share over the same period in 2006. The Company reported net income of $100 million, or 68 cents per diluted share, for the fourth quarter 2007.
Free cash flow for 2007 was $323 million based on cash from operating activities of $369 million less capital expenditures of $46 million.
For 2007, multi-product advertising sales declined 2.2 percent compared to 2006. For the fourth quarter 2007, multi-product advertising sales declined 4.9 percent compared to the same period in 2006.
2008 Business View
“While we are certainly facing some economic headwinds in the current marketplace, we firmly believe the right strategy and assets are in place to maximize the long-term value of our business,” said Ms. Harless. “Throughout 2007, we implemented a host of multi-product initiatives that are transforming our business, and we expect to see benefits from those initiatives in the future.”
“Expectations for 2008 fully support our balanced capital allocation program, which includes servicing debt, maintaining our strong dividend program and continuing to invest in growth opportunities for the business.”
From a financial perspective, Idearc expects slightly lower amortized multi-product revenues, primarily due to economic softness in the second half of 2007 continuing into the first half of 2008. The Company also expects some operating margin contraction, due to the continued transformation of the business and associated changes in the revenue mix.
“We are aggressively moving toward a more multi-product focus and a less print-centric future. Our transformation will not be instantaneous. It is a strategic, well-managed process that balances all aspects of our business — sales, marketing, operations and employees,” Ms. Harless concluded.
Webcast Information
Idearc welcomes investors, media and other interested parties to join Kathy Harless, Idearc president and CEO, and Samuel D. (Dee) Jones, acting chief financial officer, in a discussion via a webcast and teleconference beginning today at 10:00 a.m. (Eastern). Individuals within the United States can access the earnings call by dialing 888-603-6873. International participants should dial 973-582-2706. The pass code for the call is: 28722854. In order to ensure a prompt start time, please dial in to the call by 9:50 a.m. (Eastern). A replay of the teleconference will be available at 800-642-1687. International callers can access the replay by calling 706-645-9291. The replay pass code is 28722854. The replay will be available through Feb. 21. In addition, a live webcast will be available on Idearc’s Web site atwww.idearc.com, under the Investor Relations tab.
Note: This press release includes non-GAAP financial measures. See the financial schedules accompanying this press release andhttp://ir.idearc.com/ for reconciliations of these non-GAAP financial measures to generally accepted accounting principles (GAAP).
3
Certain statements included in this press release and the hyperlinked materials constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect Idearc’s current views with respect to its financial performance and future events with respect to its business and industry in general. Statements that include the words “believe,” “forecast,” “expect” and similar expressions identify forward-looking statements. Idearc cautions you not to place undue reliance on these forward-looking statements. The following important factors could affect future results and could cause those results to differ materially from those expressed in the forward-looking statements: (i) risks related to our substantial indebtedness; (ii) changes in our competitive position due to competition from other yellow pages publishers and search engines and/or our ability to anticipate or respond to changes in technology and user preferences; (iii) access to capital markets and changes in credit ratings; (iv) changes in the availability and cost of printing raw materials and third-party printers and distributors; (v) increased credit risk associated with our reliance on small- and medium-sized businesses; (vi) changes in operating performance; (vii) increased demands on our management team as a result of operating as an independent company; (viii) changes in U.S. labor, business, political and/or economic conditions; (ix) changes in governmental regulations and policies and actions of regulatory bodies; (x) risks inherent in our spin-off from Verizon Communications Inc., including increased costs and reduced profitability associated with operating as an independent company; and (xi) risks associated with our dependence on key agreements entered into with Verizon in connection with our spin-off. For a discussion of these and other risks and uncertainties, see Idearc Inc.’s periodic filings with the Securities and Exchange Commission, which you may view at www.sec.gov, and in particular, Idearc Inc.’s Annual Report on Form 10-K for the year ended December 31, 2006.
4
IDEARC INC.
Consolidated Statements of Income
Reported (GAAP)
Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
| | | | | | | | | | | | | |
| | | (dollars in millions, except per share amounts)
| |
| | | | |
| | | Year Ended | | | Year Ended | | | | |
| Unaudited | | 12/31/07 | | | 12/31/06 | | | % Change | |
Operating Revenue | | | | | | | | | | | | |
| Print products | | $ | 2,900 | | | $ | 2,978 | | | | (2.6 | ) |
| Internet | | | 285 | | | | 230 | | | | 23.9 | |
| Other | | | 4 | | | | 13 | | | | (69.2 | ) |
| | | | | | | | | | | |
Total Operating Revenue | | | 3,189 | | | | 3,221 | | | | (1.0 | ) |
| | | | | | | | | | | |
Operating Expense | | | | | | | | | | | | |
| Selling | | | 733 | | | | 708 | | | | 3.5 | |
| Cost of sales (exclusive of depreciation and amortization) | | | 617 | | | | 629 | | | | (1.9 | ) |
| General and administrative | | | 408 | | | | 448 | | | | (8.9 | ) |
| Depreciation and amortization | | | 88 | | | | 89 | | | | (1.1 | ) |
| | | | | | | | | | | |
Total Operating Expense | | | 1,846 | | | | 1,874 | | | | (1.5 | ) |
| | | | | | | | | | | | | |
Operating Income | | | 1,343 | | | | 1,347 | | | | (0.3 | ) |
| Interest expense, net | | | 676 | | | | 60 | | | nm | |
| | | | | | | | | | | |
Income Before Provision for Income Taxes | | | 667 | | | | 1,287 | | | | (48.2 | ) |
| Provision for income taxes | | | 238 | | | | 500 | | | | (52.4 | ) |
| | | | | | | | | | | |
Net Income | | $ | 429 | | | $ | 787 | | | | (45.5 | ) |
| | | | | | | | | | | |
Basic and Diluted Earnings per Common Share(1) | | $ | 2.94 | | | $ | 5.40 | | | | (45.6 | ) |
| Basic and diluted weighted-average common shares outstanding (in millions) | | | 146 | | | | 146 | | | | | |
Dividends Declared per Common Share | | $ | 1.37 | | | $ | — | | | | | |
| | |
| Note: |
| |
| (1) | | The number of shares issued in the spin-off on November 17, 2006 was approximately 146 million. For basic and diluted earnings per share calculations for 2006, it was assumed that approximately 146 million shares were outstanding for the entire period. Restricted stock awards granted in 2007 had no material impact on the calculation of diluted earnings per common share. |
5
IDEARC INC.
Consolidated Statements of Income
Reported (GAAP)
Three Months Ended December 31, 2007 Compared to Three Months Ended December 31, 2006
| | | | | | | | | | | | | |
| (dollars in millions, except per share amounts) | |
| | | | |
| | | 3 Mos. Ended | | | 3 Mos. Ended | | | | |
| Unaudited | | 12/31/07 | | | 12/31/06 | | | % Change | |
Operating Revenue | | | | | | | | | | | | |
| Print products | | $ | 711 | | | $ | 737 | | | | (3.5 | ) |
| Internet | | | 75 | | | | 63 | | | | 19.0 | |
| Other | | | 1 | | | | 1 | | | | — | |
| | | | | | | | | | | |
Total Operating Revenue | | | 787 | | | | 801 | | | | (1.7 | ) |
| | | | | | | | | | | |
Operating Expense | | | | | | | | | | | | |
| Selling | | | 187 | | | | 186 | | | | 0.5 | |
| Cost of sales (exclusive of depreciation and amortization) | | | 153 | | | | 155 | | | | (1.3 | ) |
| General and administrative | | | 114 | | | | 162 | | | | (29.6 | ) |
| Depreciation and amortization | | | 22 | | | | 22 | | | | — | |
| | | | | | | | | | | |
Total Operating Expense | | | 476 | | | | 525 | | | | (9.3 | ) |
| | | | | | | | | | | | | |
Operating Income | | | 311 | | | | 276 | | | | 12.7 | |
| Interest expense, net | | | 171 | | | | 81 | | | nm | |
| | | | | | | | | | | |
Income Before Provision for Income Taxes | | | 140 | | | | 195 | | | | (28.2 | ) |
| Provision for income taxes | | | 40 | | | | 88 | | | | (54.5 | ) |
| | | | | | | | | | | |
Net Income | | $ | 100 | | | $ | 107 | | | | (6.5 | ) |
| | | | | | | | | | | |
Basic and Diluted Earnings per Common Share(1) | | $ | .68 | | | $ | .73 | | | | (6.8 | ) |
| Basic and diluted weighted-average common shares outstanding (in millions) | | | 146 | | | | 146 | | | | | |
| | | | | | | | | | | | | |
Dividends Declared per Common Share | | $ | .3425 | | | $ | — | | | | | |
| | |
| Note: |
| |
| (1) | | The number of shares issued in the spin-off on November 17, 2006 was approximately 146 million. For basic and diluted earnings per share calculations for 2006, it was assumed that approximately 146 million shares were outstanding for the entire period. Restricted stock awards granted in 2007 had no material impact on the calculation of diluted earnings per common share. |
6
IDEARC INC.
Consolidated Statements of Income
Adjusted Pro Forma (Non-GAAP)(1)
Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
| | | | | | | | | | | | | |
| (dollars in millions, except per share amounts) | |
| | | | | | | | | | | | |
| | | Year Ended | | | Year Ended | | | | |
| Unaudited | | 12/31/07 | | | 12/31/06 | | | % Change | |
Operating Revenue | | | | | | | | | | | | |
| Print products | | $ | 2,900 | | | $ | 2,978 | | | | (2.6 | ) |
| Internet | | | 285 | | | | 230 | | | | 23.9 | |
| Other | | | 4 | | | | 6 | | | | (33.3 | ) |
| | | | | | | | | | | |
Total Operating Revenue | | | 3,189 | | | | 3,214 | | | | (0.8 | ) |
| | | | | | | | | | | |
Operating Expense | | | | | | | | | | | | |
| Selling | | | 733 | | | | 682 | | | | 7.5 | |
| Cost of sales (exclusive of depreciation and amortization) | | | 617 | | | | 593 | | | | 4.0 | |
| General and administrative | | | 321 | | | | 378 | | | | (15.1 | ) |
| Depreciation and amortization | | | 88 | | | | 89 | | | | (1.1 | ) |
| | | | | | | | | | | |
Total Operating Expense | | | 1,759 | | | | 1,742 | | | | 1.0 | |
| | | | | | | | | | | | | |
Operating Income | | | 1,430 | | | | 1,472 | | | | (2.9 | ) |
| Interest expense, net | | | 676 | | | | 702 | | | | (3.7 | ) |
| | | | | | | | | | | |
Income Before Provision for Income Taxes | | | 754 | | | | 770 | | | | (2.1 | ) |
| Provision for income taxes | | | 270 | | | | 290 | | | | (6.9 | ) |
| | | | | | | | | | | |
Net Income | | $ | 484 | | | $ | 480 | | | | 0.8 | |
| | | | | | | | | | | |
Basic and Diluted Earnings per Common Share(2) | | $ | 3.32 | | | $ | 3.29 | | | | 0.9 | |
| Basic and diluted weighted-average common shares outstanding (in millions) | | | 146 | | | | 146 | | | | | |
| | |
| Notes: |
| |
| (1) | | These consolidated statements of income provide a comparison of the year ended December 31, 2007 adjusted pro forma results to the year ended December 31, 2006 adjusted pro forma results. The following schedules provide reconciliations from our reported GAAP results to adjusted pro forma non-GAAP results for the periods shown above. |
| |
| (2) | | The number of shares issued in the spin-off on November 17, 2006 was approximately 146 million. For basic and diluted earnings per share calculations for 2006, it was assumed that approximately 146 million shares were outstanding for the entire period. Restricted stock awards granted in 2007 had no material impact on the calculation of diluted earnings per common share. |
7
IDEARC INC.
Consolidated Statements of Income
Adjusted Pro Forma (Non-GAAP)(1)
Three Months Ended December 31, 2007 Compared to Three Months Ended December 31, 2006
| | | | | | | | | | | | | |
| (dollars in millions, except per share amounts) | |
| |
| | | 3 Mos. Ended | | | 3 Mos. Ended | | | | |
| Unaudited | | 12/31/07 | | | 12/31/06 | | | % Change | |
Operating Revenue | | | | | | | | | | | | |
| Print products | | $ | 711 | | | $ | 737 | | | | (3.5 | ) |
| Internet | | | 75 | | | | 63 | | | | 19.0 | |
| Other | | | 1 | | | | 1 | | | | — | |
| | | | | | | | | | | |
Total Operating Revenue | | | 787 | | | | 801 | | | | (1.7 | ) |
| | | | | | | | | | | |
Operating Expense | | | | | | | | | | | | |
| Selling | | | 187 | | | | 181 | | | | 3.3 | |
| Cost of sales (exclusive of depreciation and amortization) | | | 153 | | | | 151 | | | | 1.3 | |
| General and administrative | | | 97 | | | | 93 | | | | 4.3 | |
| Depreciation and amortization | | | 22 | | | | 22 | | | | — | |
| | | | | | | | | | | |
Total Operating Expense | | | 459 | | | | 447 | | | | 2.7 | |
| | | | | | | | | | | | | |
Operating Income | | | 328 | | | | 354 | | | | (7.3 | ) |
| Interest expense, net | | | 171 | | | | 176 | | | | (2.8 | ) |
| | | | | | | | | | | |
Income Before Provision for Income Taxes | | | 157 | | | | 178 | | | | (11.8 | ) |
| Provision for income taxes | | | 47 | | | | 73 | | | | (35.6 | ) |
| | | | | | | | | | | |
Net Income | | $ | 110 | | | $ | 105 | | | | 4.8 | |
| | | | | | | | | | | |
Basic and Diluted Earnings per Common Share(2) | | $ | .75 | | | $ | .72 | | | | 4.2 | |
| Basic and diluted weighted-average common shares outstanding (in millions) | | | 146 | | | | 146 | | | | | |
| | |
| Notes: |
| |
| (1) | | These consolidated statements of income provide a comparison of the three months ended December 31, 2007 adjusted pro forma results to the three months ended December 31, 2006 adjusted pro forma results. The following schedules provide reconciliations from our reported GAAP results to adjusted pro forma non-GAAP results for the periods shown above. |
| |
| (2) | | The number of shares issued in the spin-off on November 17, 2006 was approximately 146 million. For basic and diluted earnings per share calculations for 2006, it was assumed that approximately 146 million shares were outstanding for the entire period. Restricted stock awards granted in 2007 had no material impact on the calculation of diluted earnings per common share. |
8
IDEARC INC.
Consolidated Statements of Income
Reported (GAAP)
Three Months Ended December 31, 2007 Compared to Three Months Ended September 30, 2007
| | | | | | | | | | | | | |
| (dollars in millions, except per share amounts) | |
| |
| | | 3 Mos. Ended | | | 3 Mos. Ended | | | | |
| Unaudited | | 12/31/07 | | | 9/30/07 | | | % Change | |
Operating Revenue | | | | | | | | | | | | |
| Print products | | $ | 711 | | | $ | 721 | | | | (1.4 | ) |
| Internet | | | 75 | | | | 69 | | | | 8.7 | |
| Other | | | 1 | | | | 1 | | | | — | |
| | | | | | | | | | | |
Total Operating Revenue | | | 787 | | | | 791 | | | | (0.5 | ) |
| | | | | | | | | | | |
Operating Expense | | | | | | | | | | | | |
| Selling | | | 187 | | | | 164 | | | | 14.0 | |
| Cost of sales (exclusive of depreciation and amortization) | | | 153 | | | | 143 | | | | 7.0 | |
| General and administrative | | | 114 | | | | 104 | | | | 9.6 | |
| Depreciation and amortization | | | 22 | | | | 22 | | | | — | |
| | | | | | | | | | | |
Total Operating Expense | | | 476 | | | | 433 | | | | 9.9 | |
| | | | | | | | | | | | | |
Operating Income | | | 311 | | | | 358 | | | | (13.1 | ) |
| Interest expense, net | | | 171 | | | | 168 | | | | 1.8 | |
| | | | | | | | | | | |
Income Before Provision for Income Taxes | | | 140 | | | | 190 | | | | (26.3 | ) |
| Provision for income taxes | | | 40 | | | | 73 | | | | (45.2 | ) |
| | | | | | | | | | | |
Net Income | | $ | 100 | | | $ | 117 | | | | (14.5 | ) |
| | | | | | | | | | | |
Basic and Diluted Earnings per Common Share(1) | | $ | .68 | | | $ | .80 | | | | (15.0 | ) |
| Basic and diluted weighted-average common shares outstanding (in millions) | | | 146 | | | | 146 | | | | | |
| | |
| Note: |
| |
| (1) | | Restricted stock awards granted in 2007 had no material impact on the calculation of diluted earnings per common share. |
9
IDEARC INC.
Consolidated Statements of Income
Adjusted Pro Forma (Non-GAAP)(1)
Three Months Ended December 31, 2007 Compared to Three Months Ended September 30, 2007
| | | | | | | | | | | | | |
| | | (dollars in millions, except per share amounts) | |
| |
| | | 3 Mos. Ended | | | 3 Mos. Ended | | | | |
| Unaudited | | 12/31/07 | | | 9/30/07 | | | % Change | |
Operating Revenue | | | | | | | | | | | | |
| Print products | | $ | 711 | | | $ | 721 | | | | (1.4 | ) |
| Internet | | | 75 | | | | 69 | | | | 8.7 | |
| Other | | | 1 | | | | 1 | | | | — | |
| | | | | | | | | | | |
Total Operating Revenue | | | 787 | | | | 791 | | | | (0.5 | ) |
| | | | | | | | | | | |
Operating Expense | | | | | | | | | | | | |
| Selling | | | 187 | | | | 164 | | | | 14.0 | |
| Cost of sales (exclusive of depreciation and amortization) | | | 153 | | | | 143 | | | | 7.0 | |
| General and administrative | | | 97 | | | | 86 | | | | 12.8 | |
| Depreciation and amortization | | | 22 | | | | 22 | | | | — | |
| | | | | | | | | | | |
Total Operating Expense | | | 459 | | | | 415 | | | | 10.6 | |
Operating Income | | | 328 | | | | 376 | | | | (12.8 | ) |
| Interest expense, net | | | 171 | | | | 168 | | | | 1.8 | |
| | | | | | | | | | | |
Income Before Provision for Income Taxes | | | 157 | | | | 208 | | | | (24.5 | ) |
| Provision for income taxes | | | 47 | | | | 80 | | | | (41.3 | ) |
| | | | | | | | | | | |
Net Income | | $ | 110 | | | $ | 128 | | | | (14.1 | ) |
| | | | | | | | | | | |
Basic and Diluted Earnings per Common Share(2) | | $ | .75 | | | $ | .88 | | | | (14.8 | ) |
| Basic and diluted weighted-average common shares outstanding (in millions) | | | 146 | | | | 146 | | | | | |
| | |
| Note: |
| |
| (1) | | These consolidated statements of income provide a comparison of the three months ended December 31, 2007 adjusted pro forma results to the three months ended September 30, 2007 adjusted pro forma results. The following schedules provide reconciliations from our reported GAAP results to adjusted pro forma non-GAAP results for the periods shown above. |
| |
| (2) | | Restricted stock awards granted in 2007 had no material impact on the calculation of diluted earnings per common share. |
10
IDEARC INC.
Consolidated Statements of Income
Reconciliation from Reported (GAAP) to Adjusted Pro Forma (Non-GAAP)
Year Ended December 31, 2007
| | | | | | | | | | | | | | | | | |
| | | | | | | (dollars in millions, except per share amounts) | |
| |
| | | | | | | Transition Costs | | | | |
| | | Year Ended | | | | | | | | | | | Year Ended | |
| | | 12/31/07 | | | | | | | | | | | 12/31/07 | |
| | | | | | | | | | | | | | | Adjusted | |
| | | Reported | | | Stock-Based | | | Separation | | | Pro Forma | |
| Unaudited | | (GAAP) | | | Compensation(2) | | | Costs(3) | | | (Non-GAAP) | |
Operating Revenue | | | | | | | | | | | | | | | | |
| Print products | | $ | 2,900 | | | $ | — | | | $ | — | | | $ | 2,900 | |
| Internet | | | 285 | | | | — | | | | — | | | | 285 | |
| Other | | | 4 | | | | — | | | | — | | | | 4 | |
| | | | | | | | | | | | | |
Total Operating Revenue | | | 3,189 | | | | — | | | | — | | | | 3,189 | |
| | | | | | | | | | | | | |
Operating Expense | | | | | | | | | | | | | | | | |
| Selling | | | 733 | | | | — | | | | — | | | | 733 | |
| Cost of sales (exclusive of depreciation and amortization) | | | 617 | | | | — | | | | — | | | | 617 | |
| General and administrative | | | 408 | | | | (19 | ) | | | (68 | ) | | | 321 | |
| Depreciation and amortization | | | 88 | | | | — | | | | — | | | | 88 | |
| | | | | | | | | | | | | |
Total Operating Expense | | | 1,846 | | | | (19 | ) | | | (68 | ) | | | 1,759 | |
| | | | | | | | | | | | | |
Operating Income | | | 1,343 | | | | 19 | | | | 68 | | | | 1,430 | |
| Interest expense, net | | | 676 | | | | — | | | | — | | | | 676 | |
| | | | | | | | | | | | | |
Income Before Provision for Income Taxes | | | 667 | | | | 19 | | | | 68 | | | | 754 | |
| Provision for income taxes | | | 238 | | | | 7 | | | | 25 | | | | 270 | |
| | | | | | | | | | | | | |
Net Income | | $ | 429 | | | $ | 12 | | | $ | 43 | | | $ | 484 | |
| | | | | | | | | | | | | |
Basic and Diluted Earnings per Common Share | | $ | 2.94 | | | $ | .08 | | | $ | .29 | | | $ | 3.32 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
| Operating income | | $ | 1,343 | | | $ | 19 | | | $ | 68 | | | $ | 1,430 | |
| Depreciation and amortization | | | 88 | | | | — | | | | — | | | | 88 | |
| | | | | | | | | | | | | |
OIBITDA (non-GAAP)(1) | | $ | 1,431 | | | $ | 19 | | | $ | 68 | | | $ | 1,518 | |
| | | | | | | | | | | | | |
OIBITDA margin (non-GAAP)(1) | | | 44.9 | % | | | | | | | | | | | 47.6 | % |
| | |
| Notes: |
| |
| (1) | | OIBITDA is a non-GAAP measure that represents operating income before interest, taxes, depreciation, and amortization. OIBITDA margin is a non-GAAP measure calculated by dividing OIBITDA by total operating revenue. |
| |
| (2) | | The stock-based compensation reflects a one-time incentive compensation award granted to most of the Company’s employees in January 2007. |
| |
| (3) | | Separation costs are costs associated with becoming a stand-alone entity as a result of the spin-off from Verizon. |
11
IDEARC INC.
Consolidated Statements of Income
Reconciliation from Reported (GAAP) to Adjusted Pro Forma (Non-GAAP)
Three Months Ended December 31, 2007
| | | | | | | | | | | | | | | | | |
| | | | | | | (dollars in millions, except per share amounts) | |
| |
| | | | | | | Transition Costs | | | | |
| | | 3 Mos. Ended | | | | | | | | | | | 3 Mos. Ended | |
| | | 12/31/07 | | | | | | | | | | | 12/31/07 | |
| | | | | | | | | | | | | | | Adjusted | |
| | | Reported | | | Stock-Based | | | Separation | | | Pro Forma | |
| Unaudited | | (GAAP) | | | Compensation(2) | | | Costs(3) | | | (Non-GAAP) | |
Operating Revenue | | | | | | | | | | | | | | | | |
| Print products | | $ | 711 | | | $ | — | | | $ | — | | | $ | 711 | |
| Internet | | | 75 | | | | — | | | | — | | | | 75 | |
| Other | | | 1 | | | | — | | | | — | | | | 1 | |
| | | | | | | | | | | | | |
Total Operating Revenue | | | 787 | | | | — | | | | — | | | | 787 | |
| | | | | | | | | | | �� | | |
Operating Expense | | | | | | | | | | | | | | | | |
| Selling | | | 187 | | | | — | | | | — | | | | 187 | |
| Cost of sales (exclusive of depreciation and amortization) | | | 153 | | | | — | | | | — | | | | 153 | |
| General and administrative | | | 114 | | | | 2 | | | | (19 | ) | | | 97 | |
| Depreciation and amortization | | | 22 | | | | — | | | | — | | | | 22 | |
| | | | | | | | | | | | | |
Total Operating Expense | | | 476 | | | | 2 | | | | (19 | ) | | | 459 | |
| | | | | | | | | | | | | |
Operating Income | | | 311 | | | | (2 | ) | | | 19 | | | | 328 | |
| Interest expense, net | | | 171 | | | | — | | | | — | | | | 171 | |
| | | | | | | | | | | | | |
Income Before Provision for Income Taxes | | | 140 | | | | (2 | ) | | | 19 | | | | 157 | |
| Provision for income taxes | | | 40 | | | | (1 | ) | | | 8 | | | | 47 | |
| | | | | | | | | | | | | |
Net Income | | $ | 100 | | | $ | (1 | ) | | $ | 11 | | | $ | 110 | |
| | | | | | | | | | | | | |
Basic and Diluted Earnings per Common Share(1) | | $ | .68 | | | $ | (.01 | ) | | $ | .08 | | | $ | .75 | |
| |
| Operating income | | $ | 311 | | | $ | (2 | ) | | $ | 19 | | | $ | 328 | |
| Depreciation and amortization | | | 22 | | | | — | | | | — | | | | 22 | |
| | | | | | | | | | | | | |
OIBITDA (non-GAAP)(1) | | $ | 333 | | | $ | (2 | ) | | $ | 19 | | | $ | 350 | |
| | | | | | | | | | | | | |
OIBITDA margin (non-GAAP)(1) | | | 42.3 | % | | | | | | | | | | | 44.5 | % |
| | |
| Notes: |
| |
| (1) | | OIBITDA is a non-GAAP measure that represents operating income before interest, taxes, depreciation, and amortization. OIBITDA margin is a non-GAAP measure calculated by dividing OIBITDA by total operating revenue. |
| |
| (2) | | The stock-based compensation reflects a one-time incentive compensation award granted to most of the Company’s employees in January 2007. |
| |
| (3) | | Separation costs are costs associated with becoming a stand-alone entity as a result of the spin-off from Verizon. |
12
IDEARC INC.
Consolidated Statements of Income
Reconciliation from Reported (GAAP) to Adjusted Pro Forma (Non-GAAP)
Three Months Ended September 30, 2007
| | | | | | | | | | | | | | | | | |
| | | | | | | (dollars in millions, except per share amounts) | |
| |
| | | | | | | Transition Costs | | | | |
| | | 3 Mos. Ended | | | | | | | | | | | 3 Mos. Ended | |
| | | 9/30/07 | | | | | | | | | | | 9/30/07 | |
| | | | | | | | | | | | | | | Adjusted | |
| | | Reported | | | Stock-Based | | | Separation | | | Pro Forma | |
| Unaudited | | (GAAP) | | | Compensation(2) | | | Costs(3) | | | (Non-GAAP) | |
Operating Revenue | | | | | | | | | | | | | | | | |
| Print products | | $ | 721 | | | $ | — | | | $ | — | | | $ | 721 | |
| Internet | | | 69 | | | | — | | | | — | | | | 69 | |
| Other | | | 1 | | | | — | | | | — | | | | 1 | |
| | | | | | | | | | | | | |
Total Operating Revenue | | | 791 | | | | — | | | | — | | | | 791 | |
| | | | | | | | | | | | | |
Operating Expense | | | | | | | | | | | | | | | | |
| Selling | | | 164 | | | | — | | | | — | | | | 164 | |
| Cost of sales (exclusive of depreciation and amortization) | | | 143 | | | | — | | | | — | | | | 143 | |
| General and administrative | | | 104 | | | | (4 | ) | | | (14 | ) | | | 86 | |
| Depreciation and amortization | | | 22 | | | | — | | | | — | | | | 22 | |
| | | | | | | | | | | | | |
Total Operating Expense | | | 433 | | | | (4 | ) | | | (14 | ) | | | 415 | |
| | | | | | | | | | | | | |
Operating Income | | | 358 | | | | 4 | | | | 14 | | | | 376 | |
| Interest expense, net | | | 168 | | | | — | | | | — | | | | 168 | |
| | | | | | | | | | | | | |
Income Before Provision for Income Taxes | | | 190 | | | | 4 | | | | 14 | | | | 208 | |
| Provision for income taxes | | | 73 | | | | 2 | | | | 5 | | | | 80 | |
| | | | | | | | | | | | | |
Net Income | | $ | 117 | | | $ | 2 | | | $ | 9 | | | $ | 128 | |
| | | | | | | | | | | | | |
Basic and Diluted Earnings per Common Share | | $ | .80 | | | $ | .01 | | | $ | .06 | | | $ | .88 | |
| |
| Operating income | | $ | 358 | | | $ | 4 | | | $ | 14 | | | $ | 376 | |
| Depreciation and amortization | | | 22 | | | | — | | | | — | | | | 22 | |
| | | | | | | | | | | | | |
OIBITDA (non-GAAP)(1) | | $ | 380 | | | $ | 4 | | | $ | 14 | | | $ | 398 | |
| | | | | | | | | | | | | |
OIBITDA margin (non-GAAP)(1) | | | 48.0 | % | | | | | | | | | | | 50.3 | % |
| | |
| Notes: |
| |
| (1) | | OIBITDA is a non-GAAP measure that represents operating income before interest, taxes, depreciation, and amortization. OIBITDA margin is a non-GAAP measure calculated by dividing OIBITDA by total operating revenue. |
| |
| (2) | | The stock-based compensation reflects a one-time incentive compensation award granted to most of the Company’s employees in January 2007. |
| |
| (3) | | Separation costs are costs associated with becoming a stand-alone entity as a result of the spin-off from Verizon. |
13
IDEARC INC.
Consolidated Statements of Income
Reconciliation from Reported (GAAP) to Adjusted Pro Forma (Non-GAAP)
Year Ended December 31, 2006
(dollars in millions, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Transition Costs | | | | | | | Pro Forma Items | | | | |
| | | Year Ended | | | | | | | | | | | Year Ended | | | | | | | | | | | | | | | Year Ended | |
| | | 12/31/06 | | | | | | | | | | | 12/31/06 | | | | | | | | | | | | | | | 12/31/06 | |
| | | | | | | Stock-Based | | | | | | | | | | | Pension | | | | | | | | | | | Adjusted | |
| | | Reported | | | Compensation | | | Separation | | | Adjusted | | | OPEB | | | Printing | | | | | | | Pro Forma | |
| Unaudited | | (GAAP) | | | Charge(3) | | | Costs(4) | | | (Non-GAAP) | | | Reduction(5) | | | Contract(6) | | | Debt(7) | | | (Non-GAAP) | |
Operating Revenue | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Print products | | $ | 2,978 | | | $ | — | | | $ | — | | | $ | 2,978 | | | $ | — | | | $ | — | | | $ | — | | | $ | 2,978 | |
| Internet | | | 230 | | | | — | | | | — | | | | 230 | | | | — | | | | — | | | | — | | | | 230 | |
| Other | | | 13 | | | | — | | | | — | | | | 13 | | | | — | | | | (7 | ) | | | — | | | | 6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total Operating Revenue | | | 3,221 | | | | — | | | | — | | | | 3,221 | | | | — | | | | (7 | ) | | | — | | | | 3,214 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Operating Expense | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Selling | | | 708 | | | | — | | | | — | | | | 708 | | | | (26 | ) | | | — | | | | — | | | | 682 | |
| Cost of sales (exclusive of depreciation and amortization) | | | 629 | | | | — | | | | — | | | | 629 | | | | (8 | ) | | | (28 | ) | | | — | | | | 593 | |
| General and administrative | | | 448 | | | | (39 | ) | | | (30 | ) | | | 379 | | | | (1 | ) | | | — | | | | — | | | | 378 | |
| Depreciation and amortization | | | 89 | | | | — | | | | — | | | | 89 | | | | — | | | | — | | | | — | | | | 89 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total Operating Expense | | | 1,874 | | | | (39 | ) | | | (30 | ) | | | 1,805 | | | | (35 | ) | | | (28 | ) | | | — | | | | 1,742 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Operating Income | | | 1,347 | | | | 39 | | | | 30 | | | | 1,416 | | | | 35 | | | | 21 | | | | — | | | | 1,472 | |
| Interest expense, net | | | 60 | | | | — | | | | — | | | | 60 | | | | — | | | | — | | | | 642 | | | | 702 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Income Before Provision for Income Taxes | | | 1,287 | | | | 39 | | | | 30 | | | | 1,356 | | | | 35 | | | | 21 | | | | (642 | ) | | | 770 | |
| Provision for income taxes | | | 500 | | | | 15 | | | | 4 | | | | 519 | | | | 13 | | | | 8 | | | | (250 | ) | | | 290 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Net Income | | $ | 787 | | | $ | 24 | | | $ | 26 | | | $ | 837 | | | $ | 22 | | | $ | 13 | | | $ | (392 | ) | | $ | 480 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Basic and Diluted Earnings per Common Share(1) | | $ | 5.40 | | | $ | .17 | | | $ | .18 | | | $ | 5.74 | | | $ | .15 | | | $ | .09 | | | $ | (2.69 | ) | | $ | 3.29 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating income | | $ | 1,347 | | | $ | 39 | | | $ | 30 | | | $ | 1,416 | | | $ | 35 | | | $ | 21 | | | $ | — | | | $ | 1,472 | |
| Depreciation and amortization | | | 89 | | | | — | | | | — | | | | 89 | | | | — | | | | — | | | | — | | | | 89 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
OIBITDA (non-GAAP)(2) | | $ | 1,436 | | | $ | 39 | | | $ | 30 | | | $ | 1,505 | | | $ | 35 | | | $ | 21 | | | $ | — | | | $ | 1,561 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
OIBITDA margin (non-GAAP)(2) | | | 44.6 | % | | | | | | | | | | | 46.7 | % | | | | | | | | | | | | | | | 48.6 | % |
Notes:
| | |
| (1) | | The number of shares issued in the spin-off on November 17, 2006 was approximately 146 million. For basic and diluted earnings per share calculations, it was assumed that approximately 146 million shares were outstanding for the entire period. No additional shares were issued through December 31, 2006. |
| |
| (2) | | OIBITDA is a non-GAAP measure that represents operating income before interest, taxes, depreciation, and amortization. OIBITDA margin is a non-GAAP measure calculated by dividing OIBITDA by total operating revenue. |
| |
| (3) | | The stock-based compensation charge reflects a one-time adjustment to record stock compensation expense of $39 million associated with Verizon stock-based compensation and other stock-based awards that vested at the time of spin. |
| |
| (4) | | Separation costs are costs associated with becoming a stand-alone entity as a result of the spin-off from Verizon. |
| |
| (5) | | On-going pension costs are expected to be reduced, primarily as a result of the Internal Revenue Code 414(l) pension asset transfer from the Verizon pension plan as the result of the Idearc spin-off from Verizon. This reduction is partially offset by anticipated higher other post employment benefit costs. This pro forma adjustment reflects the expected on-going pension and other post employment benefit cost levels for this historical period. |
| |
| (6) | | Reflects the impact of entering into a new printing contract which resulted in exiting the commercial printing business ($7 million in revenue and $4 million in costs) and a reduction in printing cost rates. |
| |
| (7) | | In connection with the spin-off on November 17, 2006, Idearc issued $9.1 billion of debt and will incur interest expense that it did not incur in the past. This pro forma adjustment is to reflect the ongoing interest expense levels during this historical period. |
14
IDEARC INC.
Consolidated Statements of Income
Reconciliation from Reported (GAAP) to Adjusted Pro Forma (Non-GAAP)
Three Months Ended December 31, 2006
(dollars in millions, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Transition Costs | | | | | | | Pro Forma Items | | | | |
| | | 3 Mos. Ended | | | | | | | | | | | 3 Mos. Ended | | | | | | | | | | | | | | | 3 Mos. Ended | |
| | | 12/31/06 | | | | | | | | | | | 12/31/06 | | | | | | | | | | | | | | | 12/31/06 | |
| | | | | | | Stock-Based | | | | | | | | | | | Pension | | | | | | | | | | | Adjusted | |
| | | Reported | | | Compensation | | | Separation | | | Adjusted | | | OPEB | | | Printing | | | | | | | Pro Forma | |
| Unaudited | | (GAAP) | | | Charge(3) | | | Costs(4) | | | (Non-GAAP) | | | Reduction(5) | | | Contract(6) | | | Debt(7) | | | (Non-GAAP) | |
Operating Revenue | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Print products | | $ | 737 | | | $ | — | | | $ | — | | | $ | 737 | | | $ | — | | | $ | — | | | $ | — | | | $ | 737 | |
| Internet | | | 63 | | | | — | | | | — | | | | 63 | | | | — | | | | — | | | | — | | | | 63 | |
| Other | | | 1 | | | | — | | | | — | | | | 1 | | | | — | | | | — | | | | — | | | | 1 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total Operating Revenue | | | 801 | | | | — | | | | — | | | | 801 | | | | — | | | | — | | | | — | | | | 801 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Operating Expense | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Selling | | | 186 | | | | — | | | | — | | | | 186 | | | | (5 | ) | | | — | | | | — | | | | 181 | |
| Cost of sales (exclusive of depreciation and amortization) | | | 155 | | | | — | | | | — | | | | 155 | | | | (1 | ) | | | (3 | ) | | | — | | | | 151 | |
| General and administrative | | | 162 | | | | (39 | ) | | | (28 | ) | | | 95 | | | | (2 | ) | | | — | | | | — | | | | 93 | |
| Depreciation and amortization | | | 22 | | | | — | | | | — | | | | 22 | | | | — | | | | — | | | | — | | | | 22 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Total Operating Expense | | | 525 | | | | (39 | ) | | | (28 | ) | | | 458 | | | | (8 | ) | | | (3 | ) | | | — | | | | 447 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Operating Income | | | 276 | | | | 39 | | | | 28 | | | | 343 | | | | 8 | | | | 3 | | | | — | | | | 354 | |
| Interest expense, net | | | 81 | | | | — | | | | — | | | | 81 | | | | — | | | | — | | | | 95 | | | | 176 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Income Before Provision for Income Taxes | | | 195 | | | | 39 | | | | 28 | | | | 262 | | | | 8 | | | | 3 | | | | (95 | ) | | | 178 | |
| Provision for income taxes | | | 88 | | | | 15 | | | | 3 | | | | 106 | | | | 3 | | | | 1 | | | | (37 | ) | | | 73 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Net Income | | $ | 107 | | | $ | 24 | | | $ | 25 | | | $ | 156 | | | $ | 5 | | | $ | 2 | | | $ | (58 | ) | | $ | 105 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Basic and Diluted Earnings per Common Share(1) | | $ | .73 | | | $ | .17 | | | $ | .17 | | | $ | 1.07 | | | $ | .03 | | | $ | .01 | | | $ | (.40 | ) | | $ | .72 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating income | | $ | 276 | | | $ | 39 | | | $ | 28 | | | $ | 343 | | | $ | 8 | | | $ | 3 | | | $ | — | | | $ | 354 | |
| Depreciation and amortization | | | 22 | | | | — | | | | — | | | | 22 | | | | — | | | | — | | | | — | | | | 22 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
OIBITDA (non-GAAP)(2) | | $ | 298 | | | $ | 39 | | | $ | 28 | | | $ | 365 | | | $ | 8 | | | $ | 3 | | | $ | — | | | $ | 376 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
OIBITDA margin (non-GAAP)(2) | | | 37.2 | % | | | | | | | | | | | 45.6 | % | | | | | | | | | | | | | | | 46.9 | % |
Notes:
| | |
| (1) | | The number of shares issued in the spin-off on November 17, 2006 was approximately 146 million. For basic and diluted earnings per share calculations, it was assumed that approximately 146 million shares were outstanding for the entire period. No additional shares were issued through December 31, 2006. |
| |
| (2) | | OIBITDA is a non-GAAP measure that represents operating income before interest, taxes, depreciation, and amortization. OIBITDA margin is a non-GAAP measure calculated by dividing OIBITDA by total operating revenue. |
| |
| (3) | | The stock-based compensation charge reflects a one-time adjustment to record stock compensation expense of $39 million associated with Verizon stock-based compensation and other stock-based awards that vested at the time of spin. |
| |
| (4) | | Separation costs are costs associated with becoming a stand-alone entity as a result of the spin-off from Verizon. |
| |
| (5) | | On-going pension costs are expected to be reduced, primarily as a result of the Internal Revenue Code 414(l) pension asset transfer from the Verizon pension plan as the result of the Idearc spin-off from Verizon. This reduction is partially offset by anticipated higher other post employment benefit costs. This pro forma adjustment reflects the expected on-going pension and other post employment benefit cost levels for this historical period. |
| |
| (6) | | Reflects the impact of entry into a new printing contract which resulted in a reduction in printing cost rates. |
| |
| (7) | | In connection with the spin-off on November 17, 2006, Idearc issued $9.1 billion of debt and will incur interest expense that it did not incur in the past. This pro forma adjustment is to reflect the ongoing interest expense levels during this historical period. |
15
IDEARC INC.
Reconciliation of OIBITDA (non-GAAP) to OIBITDA Before Accounting Change (non-GAAP)
Three Months and Year Ended December 31, 2007 compared to Three Months and Year Ended December 31, 2006
(dollars in millions)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Reported | | | Adjusted Pro Forma(1) | |
| | | 3 Mos. Ended | | | 3 Mos. Ended | | | | | | | 3 Mos. Ended | | | 3 Mos. Ended | | | | |
| Unaudited | | 12/31/07 | | | 12/31/06 | | | % Change | | | 12/31/07 | | | 12/31/06 | | | % Change | |
| Operating Income | | $ | 311 | | | $ | 276 | | | | 12.7 | % | | $ | 328 | | | $ | 354 | | | | (7.3 | )% |
| Depreciation and Amortization | | | 22 | | | | 22 | | | | — | | | | 22 | | | | 22 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | |
OIBITDA (non-GAAP) | | | 333 | | | | 298 | | | | 11.7 | % | | | 350 | | | | 376 | | | | (6.9 | )% |
| | | | | | | | | | | | | | | | | | | | | |
| less: Accounting Change Impact | | | 6 | | | | 13 | | | | (53.8 | )% | | | 6 | | | | 13 | | | | (53.8 | )% |
| | | | | | | | | | | | | | | | | | | | | |
OIBITDA before accounting change (non-GAAP) | | $ | 327 | | | $ | 285 | | | | 14.7 | % | | $ | 344 | | | $ | 363 | | | | (5.2 | )% |
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year Ended | | | Year Ended | | | | | | | Year Ended | | | Year Ended | | | | |
| Unaudited | | 12/31/07 | | | 12/31/06 | | | % Change | | | 12/31/07 | | | 12/31/06 | | | % Change | |
| Operating Income | | $ | 1,343 | | | $ | 1,347 | | | | (0.3 | )% | | $ | 1,430 | | | $ | 1,472 | | | | (2.9 | )% |
| Depreciation and Amortization | | | 88 | | | | 89 | | | | (1.1 | )% | | | 88 | | | | 89 | | | | (1.1 | )% |
| | | | | | | | | | | | | | | | | | | | | |
OIBITDA (non-GAAP) | | | 1,431 | | | | 1,436 | | | | (0.3 | )% | | | 1,518 | | | | 1,561 | | | | (2.8 | )% |
| | | | | | | | | | | | | | | | | | | | | |
| less: Accounting Change Impact | | | — | | | | 24 | | | | (100.0 | )% | | | — | | | | 24 | | | | (100.0 | )% |
| | | | | | | | | | | | | | | | | | | | | |
OIBITDA before accounting change (non-GAAP) | | $ | 1,431 | | | $ | 1,412 | | | | 1.3 | % | | $ | 1,518 | | | $ | 1,537 | | | | (1.2 | )% |
| | | | | | | | | | | | | | | | | | | | | |
Note:
| | |
| (1) | | Previous schedules provide reconciliations of reported (GAAP) results to adjusted pro forma (non-GAAP) results for the periods shown above. |
16
IDEARC INC.
Consolidated Balance Sheets
Reported (GAAP)
As of December 31, 2007 and December 31, 2006
(dollars in millions)
| | | | | | | | | | | | | |
| Unaudited | | 12/31/2007 | | | 12/31/2006 | | | $ Change | |
Assets | | | | | | | | | | | | |
| Current assets: | | | | | | | | | | | | |
| Cash and cash equivalents | | $ | 48 | | | $ | 172 | | | $ | (124 | ) |
| Accounts receivable, net of allowances of $77 and $76 | | | 423 | | | | 325 | | | | 98 | |
| Deferred directory costs | | | 312 | | | | 294 | | | | 18 | |
| Prepaid expenses and other | | | 10 | | | | 13 | | | | (3 | ) |
| | | | | | | | | | |
| Total current assets | | | 793 | | | | 804 | | | | (11 | ) |
| | | | | | | | | | |
| Property, plant and equipment | | | 471 | | | | 474 | | | | (3 | ) |
| Less: accumulated depreciation | | | 356 | | | | 331 | | | | 25 | |
| | | | | | | | | | |
| | | | 115 | | | | 143 | | | | (28 | ) |
| | | | | | | | | | |
| Goodwill | | | 73 | | | | 73 | | | | — | |
| Other intangible assets, net | | | 303 | | | | 103 | | | | 200 | |
| Pension assets | | | 171 | | | | 174 | | | | (3 | ) |
| Non-current deferred tax assets | | | 124 | | | | 21 | | | | 103 | |
| Debt issuance costs | | | 86 | | | | 97 | | | | (11 | ) |
| Other noncurrent assets | | | 2 | | | | — | | | | 2 | |
| | | | | | | | | | |
Total Assets | | $ | 1,667 | | | $ | 1,415 | | | $ | 252 | |
| | | | | | | | | | |
| | | | | | | | | | | | | |
Liabilities and Stockholders’ Equity (Deficit) | | | | | | | | | | | | |
| Current liabilities: | | | | | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 272 | | | $ | 412 | | | $ | (140 | ) |
| Deferred revenue | | | 209 | | | | 190 | | | | 19 | |
| Current maturities of long-term debt | | | 48 | | | | 48 | | | | — | |
| Current deferred taxes | | | 28 | | | | 5 | | | | 23 | |
| Other | | | 31 | | | | 42 | | | | (11 | ) |
| | | | | | | | | | |
| Total current liabilities | | | 588 | | | | 697 | | | | (109 | ) |
| | | | | | | | | | |
| Long-term debt | | | 9,020 | | | | 9,067 | | | | (47 | ) |
| Employee benefit obligations | | | 327 | | | | 401 | | | | (74 | ) |
| Unrecognized tax benefits | | | 109 | | | | — | | | | 109 | |
| Other liabilities | | | 223 | | | | 4 | | | | 219 | |
| Stockholders’ equity (deficit): | | | | | | | | | | | | |
| Common stock ($.01 par value; 225 million shares authorized, 146,795,971 and 145,851,862 shares issued and outstanding in 2007 and 2006, respectively) | | | 1 | | | | 1 | | | | — | |
| Additional paid-in capital (deficit) | | | (8,776 | ) | | | (8,786 | ) | | | 10 | |
| Retained earnings | | | 361 | | | | 99 | | | | 262 | |
| Accumulated other comprehensive loss | | | (186 | ) | | | (68 | ) | | | (118 | ) |
| | | | | | | | | | |
| Total stockholders’ equity (deficit) | | | (8,600 | ) | | | (8,754 | ) | | | 154 | |
| | | | | | | | | | |
Total Liabilities and Stockholders’ Equity (Deficit) | | $ | 1,667 | | | $ | 1,415 | | | $ | 252 | |
| | | | | | | | | | |
17
IDEARC INC.
Consolidated Statements of Cash Flows
Reported (GAAP)
Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
(dollars in millions)
| | | | | | | | | | | | | |
| | | Year Ended | | | Year Ended | | | | |
| Unaudited | | 12/31/07 | | | 12/31/06 | | | $ Change | |
Cash Flows from Operating Activities | | | | | | | | | | | | |
| Net income | | $ | 429 | | | $ | 787 | | | $ | (358 | ) |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | | | | | |
| Depreciation and amortization expense | | | 88 | | | | 89 | | | | (1 | ) |
| Employee retirement benefits | | | (5 | ) | | | 50 | | | | (55 | ) |
| Deferred income taxes | | | (21 | ) | | | (46 | ) | | | 25 | |
| Provision for uncollectible accounts | | | 159 | | | | 140 | | | | 19 | |
| Stock-based compensation expense | | | 27 | | | | 56 | | | | (29 | ) |
| Changes in current assets and liabilities | | | | | | | | | | | | |
| Accounts receivable | | | (253 | ) | | | (96 | ) | | | (157 | ) |
| Deferred directory costs | | | (18 | ) | | | (3 | ) | | | (15 | ) |
| Other current assets | | | (2 | ) | | | (6 | ) | | | 4 | |
| Accounts payable and accrued liabilities | | | (8 | ) | | | 33 | | | | (41 | ) |
| Other, net | | | (27 | ) | | | (11 | ) | | | (16 | ) |
| | | | | | | | | | |
| Net cash provided by operating activities | | | 369 | | | | 993 | | | | (624 | ) |
| | | | | | | | | | |
| | | | | | | | | | | | | |
Cash Flows from Investing Activities | | | | | | | | | | | | |
| Capital expenditures (including capitalized software) | | | (46 | ) | | | (64 | ) | | | 18 | |
| Acquisitions | | | (230 | ) | | | (16 | ) | | | (214 | ) |
| Proceeds from sale of assets | | | 26 | | | | 20 | | | | 6 | |
| Other, net | | | 4 | | | | 19 | | | | (15 | ) |
| | | | | | | | | | |
| Net cash used in investing activities | | | (246 | ) | | | (41 | ) | | | (205 | ) |
| | | | | | | | | | |
Cash Flows from Financing Activities | | | | | | | | | | | | |
| Proceeds from issuance of long-term debt | | | — | | | | 1,953 | | | | (1,953 | ) |
| Repayment of long-term debt | | | (47 | ) | | | — | | | | (47 | ) |
| Change in note receivable due from former parent | | | — | | | | 348 | | | | (348 | ) |
| Dividends paid to Idearc stockholders | | | (200 | ) | | | — | | | | (200 | ) |
| Dividends / returns of capital paid to former parent | | | — | | | | (652 | ) | | | 652 | |
| Final distribution to former parent | | | — | | | | (2,429 | ) | | | 2,429 | |
| | | | | | | | | | |
| Net cash used in financing activities | | | (247 | ) | | | (780 | ) | | | 533 | |
| | | | | | | | | | |
Increase (decrease) in cash and cash equivalents | | | (124 | ) | | | 172 | | | | (296 | ) |
Cash and cash equivalents, beginning of year | | | 172 | | | | — | | | | 172 | |
| | | | | | | | | | |
Cash and cash equivalents, end of period | | $ | 48 | | | $ | 172 | | | $ | (124 | ) |
| | | | | | | | | | |
18
IDEARC INC.
Multi-Product Advertising Sales
(dollars in millions)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 3 Mos. Ended | | | 3 Mos. Ended | | | 3 Mos. Ended | | | Year Ended | | | Year Ended | | | Year Ended | |
| Unaudited | | 12/31/07 | | | 12/31/06 | | | 12/31/05 | | | 12/31/07 | | | 12/31/06 | | | 12/31/05 | |
Net Print Products Revenue(1) | | $ | 799 | | | $ | 856 | | | $ | 868 | | | $ | 2,815 | | | $ | 2,939 | | | $ | 3,032 | |
% Change year-over-year | | | (6.7 | )% | | | (1.4 | )% | | | | | | | (4.2 | )% | | | (3.1 | )% | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Net Internet Revenue(2) | | | 75 | | | | 63 | | | | 50 | | | | 285 | | | | 230 | | | | 197 | |
% Change year-over-year | | | 19.0 | % | | | 26.0 | % | | | | | | | 23.9 | % | | | 16.8 | % | | | | |
| | | | | | | | | | | | | | | | | | | |
Net Multi-Product Advertising Sales(3) | | $ | 874 | | | $ | 919 | | | $ | 918 | | | $ | 3,100 | | | $ | 3,169 | | | $ | 3,229 | |
% Change year-over-year | | | (4.9 | )% | | | 0.1 | % | | | | | | | (2.2 | )% | | | (1.9 | )% | | | | |
| | | | | | | | | | | | | | | | | | | |
Notes:
| | |
| (1) | | Net print products revenue represents the total revenue value (less a provision for sales allowances) of directories published that will be amortized over the life of the directories, which is typically 12 months. Directories from preceding periods have been aligned to match the publication schedule of 2007 publications, allowing for a meaningful comparison of current publications to previous publications. |
| |
| (2) | | Net Internet revenue represents total revenue for our fixed-fee and performance-based advertising products less a provision for sales allowances. Fixed-fee advertising includes advertisement placement on our Superpages.com website, and website development and hosting for our advertisers. Revenue from fixed-fee advertisers is recognized monthly over the life of the advertising service. Performance-based advertising revenue is earned when consumers connect with our Superpages.com advertisers by a “click” on their Internet advertising or a phone call to their business. Revenue from performance-based advertising is recognized when there is evidence that qualifying transactions have occurred. |
| |
| (3) | | Net multi-product advertising sales is a statistical measure. It is important to distinguish net multi-product advertising sales from total operating revenue, which on our financial statements is recognized under the deferral and amortization method. |
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About Idearc Inc.
Idearc Inc. (NYSE: IAR) delivers products on multiple platforms to help consumers find the information they want, wherever they are. Idearc’s multi-platform of advertising solutions includes Superpages.com®, Superpages MobileSM, Superpages Mobile SM for BlackBerry®, Switchboard.com®, LocalSearch.com, Verizon® Yellow Pages, Verizon® White Pages, smaller-sized portable Verizon® Yellow Pages Companion Directories, Solutions At Hand™ magazine, Solutions at Home™ magazine, and Solutions on the Move™ and Solutions Direct™ direct mail packages. For more information, visit www.idearc.com.
IAR-G
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